As I noted in part one, GAO has found the Coast Guard’s Deepwater program “unachievable.” Basically, they see a mismatch between the historic funding levels and the anticipated funding requirements. This in turn has impacted the delivery schedule, which in turn further adversely effects cost. Additionally significant questions still remain regarding the C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) system that was intended to tie the “system of systems” together. There also remains a significant unknown in the form of the Offshore Patrol Cutter (OPC) which, as the most costly single system in the program, constituted a third of the total “Deepwater” Program’s estimated cost in the 2007 Baseline.

I’m not sure I would call that “unachievable,” rather it is simply more expensive and more difficult than the Coast Guard was lead to believe, and four years later the plan is already well out of date. The Cost overruns are significant, but no more so than a lot of procurements and pale in comparison to the F-35 and Littoral Combat Ship cost overruns.

Costs

This is the cost growth GAO has seen. From Table 2 (page 12), “Increased Total Acquisition Cost Estimates for Deepwater Assets with approved baselines as of May 2011 (Then year dollars in millions)”:

Asset                                                    2007 Baseline                Revised Baseline                 % Change

NSC                                                             3,450                                 4,749                                  38
FRC                                                             3,206                                 4,243                                  32
OPC                                                             8,098                         Not yet revised                         —
Cutter Small Boats                                       110                          Not yet revised                         — (see b. below)
MEC Sustainment                                        317                                       321                                    1
Patrol Boat Sustainment                             117                                       194                                 66
MPA                                                             1,706                                  2,400                                  41
C-130J                                                               11                                       176                             1,500 (see c. below)
C-130H                                                            610                                      745                                  22
HH-65                                                             741                                    1,242                                  68 (see d. below)
HH-60                                                             451                                       487                                    8
UAS (unmanned air system)                     503                           Not yet revised                         —
C4ISR                                                            1,353                                   2,522                                  86
Other Deepwater                                        3,557                           No revision expected              — (see e. below)
—————————————————————————————————————————————————–
Total                                                           24,230                                   29,347                                21

There were some notes with this, including some that explained some of the increased costs:

If the revised baselines present both threshold costs (the maximum costs allowable before a
breach occurs) and objective costs (the minimum cost expected), threshold costs are used. An
acquisition program baseline breach of cost, schedule, or performance is an inability to meet the
threshold value of the specific parameter.

a. When a revised baseline is not available, the 2007 baseline cost is carried forward for calculating
the total revised baseline cost.

b. The cutter small boat program includes two different versions of small boats. Only one had an
approved revised baseline as of May 2011.

c. The acquisition costs are related to the mission system. The original HC-130J baseline only included
costs associated with the fleet introduction of missionized aircraft and did not include the cost of
acquiring the mission system and logistics support of the first six aircraft, and the revised baseline
corrected this omission.

d. The 2007 approved baseline did not include airborne use of force, National Capital Region Air
Defense, and the surface search radar for the HH-65. The addition of these capabilities constitutes
about $420 million of the revised costs.

e. Includes other Deepwater costs, such as program management, that the Coast Guard states do not
require a new baseline.

Additional note from page 13, “The original 2007 estimate for one OPC was approximately $320 million. However, the Coast Guard’s fiscal years 2012-2016 capital investment plan cites a planned $640 million in fiscal year 2015 for the lead cutter. Coast Guard resource and acquisition directorate officials stated that this $640 million is a point estimate for the lead cutter, some design work, and project management”

If we look at only the programs that have had revised baseline (these make up 64% of the 2007 baseline), the cost growth has actually been 33% and even that cost is not really reliable since, in some cases, prices have increased since the revised baseline. The true cost of the eight NSCs for which good cost information is now available is expected to be approximately $5.6B, a 62% increase over the 2007 baseline. There is also still considerable uncertainty about the final cost of the unmanned air systems and the C4ISR systems.

Scheduling

The second dimension that GAO regards as unachievable is projected delivery schedule. Figure 3 on page 16 shows scheduled deliveries of the final item in each of the several projects, as originally scheduled in the Baseline document approved in 2007, as approved in subsequent baseline revisions, and as projected in the FY2012-2016 Capital Investment Plan (CIP) and the projected delay, comparing the 2007 baseline and the 2012-2016 CIP. Because the projected costs exceed likely funding, they believe that even the FY2012-2016 Capital Investment Plan schedule is “unachievable.”

Asset                                                    2007 Baseline    Revised Baseline      2012-2016 CIP     Projected Delay (years)
—————————————————————————————————————————————————–
NSC                                                              2014                        2016                       2018                            4
FRC                                                              2016                        2021                       2022                            6
MEC Sustainment                                    2016                        2017                       2014                     (2 years early)
Patrol Boat Sustainment                         2013                        2014                           —                               ?
MPA                                                            2016                        2020                      2025                             9
C-130J                                                        2009                        2011                       2011                              2
C-130H                                                       2017                         2017                       2022                             5
HH-65                                                        2013                        2020                      2020                             7
HH-60                                                       2019                        2020                      2020                              1
C4ISR                                                        2014                        2027                       2025                             11
OPC                                                            2021                          —                          2031                              10
—————————————————————————————————————————————————–

You might note that the Cutter boats and Unmanned Air Systems are not included in this table.

Capabilities

Beginning on page 30 the study notes, “Key Decisions Remain for Assets in Design to Ensure Promised Capabilities Are Achieved.”

The primary technical risk appears to be the C4ISR system which was to tie the “system of systems” together and allow the service to perform the missions with few (but more capable) assets. The CG has apparently already backed away from the concept of providing all units a common operational picture. The all singing, all dancing NTDS with pictures now appears both unnecessary and too expensive. The additional overhead in maintaining classified material may also a consideration. What the Coast Guard will ultimately choose was undecided when the study was written.

By far the largest chunk of  “Deepwater” AC&I money is expected to go for the twenty-five Offshore Patrol Cutters (OPC). “DHS approved the OPC’s requirements document in October 2010 despite unresolved concerns about three key performance parameters—seakeeping, speed, and range—that shape a substantial portion of the cutter’s design. For example, DHS questioned the need for the cutter to conduct full operations during difficult sea conditions, which impact the weight of the cutter and ultimately its cost. The Coast Guard has stated that limiting the ability to conduct operations during difficult sea conditions would preclude operations in key mission areas. While it approved the OPC requirements document, DHS at the same time commissioned a study to further examine these three key performance parameters. According to Coast Guard officials, the study conducted by the Center for Naval Analysis found that the three key performance parameters were reasonable, accurate, and adequately documented.”–That is the good news–The GAO again took the CG to task because it has not completed a Fleet Mix Study that can be used for determining trade-offs (page 45/46), but noted that DHS is doing one that includes an updated 270 and the Littoral Combat Ship as alternatives.

The report talks about a number of remaining issues, some of which have already been corrected, some of which sound like typical teething problems for new systems. One that does bother me is that the helo haul down and traversing system referred to as “ASSIST,” has been found unsatisfactory. The CG, having already bought four systems and equipping one helicopter, is now looking at the system the Navy uses (p. 40). I’m a bit surprised we didn’t go to the Navy system first for the sake of commonality.

Conclusion

The Deepwater systems are not “unachievable” in the literal sense. The question remains, will it be pursued? and will it be pursued in a reasonably expeditious fashion?

The decision to “outsource” to ICGS (Integrated Coast guard Systems) was a mistake, but it was what the government was encouraging at the time. The 2007 baseline was the best the CG could do at the time, but it was inevitably flawed having been tainted by the “puffing” of contractors who were at best overly optimistic.  Actual costs have exceeded estimates but they are not out of line compared to similar DOD programs. As I understand it, the Coast Guard engineering staffs had been gutted in previous economy moves so it is not surprising they did not get it 100% correct first try. To hold the CG to the 2007 baseline is simply unrealistic. The Question remains, does the nation want the CG to have a presence in the offshore regions? The Navy is shrinking and will not fill that void.  Dragging out the procurement will only result in higher prices in the end.

Related:

• FY2012 AC&I Budget Request for Vessels
• What We Have  Here is a Failure to Communicate